1. 1 Antimonopoly Committee of Ukraine Guidelines on setting fines imposed for violations of the law on protection of economic competition GENERAL APPROACHES First Deputy Chairman of the Committee M. Nizhnik Kyiv, 09 September 2015

2. 2 General procedure of setting fines imposed for violations of the law on protection of economic competition 1.Determination of the basic amount of fine. 2.Taking into account aggravating and mitigating circumstances. 3.Final determination of the amount of fine with regard to:  the maximum possible value under Article 52 of the Law of Ukraine "On Protection of Economic Competition" and Article 21 of the Law of Ukraine "On Protection of Economic Competition";  Impact of the fine on the competitiveness of the economic entity or the ability to meet consumer demand (possibility of decrease);  Securing the purposes of application of fines in exceptional cases (possibility of increase).

3. 3 Direct determination of the basic fine The possibility of determining the basic amount of the fine as:  Amount of improper advantage (profit), gained from violation increased by restraining index

4. 4 Advantages and disadvantages of direct determination of the basic fine Advantages : Provides maximum effect from removal of illegally obtained monopoly and cartel rent Disadvantages : The difficulty and in some cases - the impossibility of determining the amount of an improper advantage; discretion of the AMCU on the choice of fine calculation method

5. 5 The circumstances to be taken into consideration when determining the basic amount of the fine IN ORDER TO Economic scope of violation Gravity of violation Deterrent effect Remove illegally obtained rent and cause negative consequences for the offender for the purpose of prevention

6. 6 Economic scope of the violation If the violation is caused by seller Income (proceeds) from sales of products (goods and services) effected upon the violation If the violation is caused by buyer Conventional (hypothetical) cost of purchase of goods (works, services) occurred upon violation that would be incurred without any violation and the purchase would be carried out for specific purposes FEATURES In case, when violation negatively affects competition in the adjacent market In case of violation at auction (bid rigging)

7. 7 To calculate the basic amount of the fine the income / expenses shall be taken into account:  in the designated territory, or if such sale / purchase affect or may affect economic competition in Ukraine;  During the effective time of the violation (if the features are not provided by explanations). Spatial and temporal dimension of the economic scope of violation

8. 8 The gravity of violation shall be taken into account as a percentage of violation related income (expenses), which, according to empirical studies, is normal amount of overpricing (underpricing):  in the case of anticompetitive concerted actions of economic entities - 15-30 percent;  in the case of abuse of monopoly (dominant) position - 10-15 percent;  in the case of concentrations that lead to monopolization or significant restriction of competition in the market – 3-7 percent. Consideration of the gravity of violation

9. 9 Ensuring deterrent effect Ensuring deterrent effect shall be done by increasing the percentage characterizing the gravity of violation, by surcharge rate inversely proportional to the probability of detecting violations of a certain type.

10. 10 The suggested final value of percent of income / expense level related to the violation based on the gravity of violations considering deterrent effect 45 percent 30 percent 15 percent 5 percent Horizontal anticompetitive concerted actions betwee competitors (cartels) Other types of anticompetitive concerted actions The abuse of dominant position and non-enforcement Restrictive practices and breach of the control of concentrations

11. 11 The base fine in fixed amount Fixed basic amount of fines ( in the income tax exemption (personal exemption ) is proposed to be set after a formal breach of moderate severity, namely:  declination to committing violations of the legislation on economic competition protection ;  breach of presenting information ;  obstruction of the Committee activities.

12. 12 For the purpose to enable the consideration of aggravating circumstances the basic amount of a fine shall not exceed two- thirds of the maximum possible amount of the fine, regarding the application of provisions Article 52 of the Law of Ukraine "On Protection of Economic Competition" and the Article 21 of the Law of Ukraine "On Protection Against Unfair Competition“. Increase of the basic amount of fine

13. 13 Aggravating circumstances In the case of evidence, including the following aggravating circumstances :  repeated (relapse);  initiate actions (inaction );  obstructing the case investigation. The list of circumstances is harmonized with EU Guidelines on the method of setting fines.

14. 14 Mitigating circumstances Proposed non-exhaustive list of mitigating circumstances, for example:  voluntary termination defendant actions (inaction);  compensation for harm caused by the infringement or eliminate the effects of abuse in other ways appropriate to the decision of the Committee;  eliminate on its own initiative the conditions that contributed to the commission of violations;  committing violations due to negligence;  the actual non-compliance of conditions by the member of the concerted actions and the availability (existence) of evidence that the entity actually competed on the market;  cooperation with the Committee during case proceedings  committing violations due to the influence of the executive authority (power)  voluntary appeal before start of proceedings case on violation concerning obtaining permission for merger;  Existence of compliance program (?)

15. 15 The problematic issue of quantitative measure (indices) that takes into account aggravating and mitigating circumstances in the calculation of fines Pro argument : increased level of legal certainty. Argument against: opportunity to determine in advance (anticipatory) the amount of the fine creates the risk that it will be embedded in monopoly rents (cartel) rent and transferred to consumer; limited flexibility and comprehensively assess the circumstances of the case; in most jurisdictions set or the total possible amount of increase due to aggravating circumstances, or increase in size for certain aggravating circumstances (usually relapse).

16. 16 Proposals for quantitative mechanisms taking into account mitigating and aggravating circumstances when calculating fines  quantitative consideration of the mechanisms provides only for certain mitigating and aggravating circumstances;  It is determined or "floating" ("from to") or marginal ("before") aggravating factors impact on mitigating circumstances of the amount of fine.

17. 17 CASE Case on violation of the law on protection as abuse of monopoly (dominant) position the market for use of the linen in trains. Actually fined : 50 million UAH The amount of revenue (proceeds) associated with violation: 12,781 million UAH The basic amount of the fine: 12,781 * 0,15 = 1,917 million UAH Mitigating circumstances: 10 % (as mitigation) Final calculation of the amount of fine : 1, 725 million UAH

18. 18 CASE Case on violation of the law on protection economic Competition as implementation of concentration without the prior Committee authorization the household appliance market. Actually fined : 105 thousand UAH The amount of revenue (proceeds) in the market where the infringement occurred: 577,103 million UAH The basic amount of the fine: 577 103 868,2 * 0,05 = 28,855 million UAH Final calculation of the amount of fine : 28, 855 million UAH

19. 19 CASE Case on violation of the law on protection economic Competition as anticompetitive concerted actions on the retail market. Actually fined : 203 million UAH The amount of buyer costs associated with violation: 50 902 million UAH The basic amount of the fine : 50 902 766 680 * 0,45 = 22 906 million UAH Aggravating circumstances: 10 % (coordination of committing abuse) Final calculation of the amount of fine : 25 196 million UAH

20. 20 CASE Case on violation of the law on protection economic Competition as anticompetitive concerted actions on the market of untreated wood, that was realized at specialized auctions. Actually fined: 419 million UAH The amount buyers costs associated with violation: 620,26 million UAH the actual amount of buyers costs : 506,36 million UAH The basic amount of the fine: 620,26 million UAH *0,45 = 279,12 million UAH Aggravating circumstances: 17 % Final calculation of the amount of fine : 326,57 million UAH